Investing In Relationships and Mastering The Art Of Raising Money | Adrian Lufschanowski

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In this episode of Investing On Purpose, JP sits down with his partner at Thrive FP, President of Thrive Adrian Lufschanowski, to talk all things raising money, building relationships, and the secrets to a successful career in commercial real estate.


[00:00:00] Adrian: I think the hard thing is as you get bigger and we’ve seen it in our industry, you start to believe it’s you. We know very well it’s not us. We’re a big part of it, but the market is much bigger than we are. And I tell investors all the time, you can buy. A great property at the wrong time. And you look like an idiot and you can buy a horrible property, which we’ve bought many at the right time.

[00:00:29] Adrian: And you look like a genius. What we don’t do is say that’s because of us. We’ll tell them, yeah, we’ve done the work. We know how to build communities. We provide for our tenants really well, but the wind was behind our sales. And when you give credit. To the whole picture, as opposed to it’s just us, it’s different.

[00:00:58] JP: Hi, this is J. P. Newman on [00:01:00] Investing on Purpose, and today, finally, you’re going to meet the secret. Behind Thrive. The other secret, my partner, Adrian Lushinowski. Wow. You know, we talk about Thrive and all the amazing journey that we’ve had with social impact and success of commercial real estate. Um, you don’t hear as much from Adrian, but Adrian is definitely a key part of the secret sauce.

[00:01:19] JP: And today on this episode, you’re going to hear about Adrian’s unique journey from Basie from social work to commercial real estate finance and everything in between. The most important thing I think you’re going to learn on this episode, I mean, to, to share the story of how we really went from nothing and how Adrian learned how to raise money.

[00:01:36] JP: Some great lessons on how do you raise money in capital? How do you keep the capital from leaving? And what do you do when things are great? How do you celebrate the victories? And when there’s bad news. How do you deliver the bad news and still maintain those relationships? With Adrian, by the way, I’d say might be the best out of anyone I’ve ever seen, which is great that he’s my partner, at maintaining amazing relationships, which have translate translated into [00:02:00] happy investors, that even whether good results or bad results, the loyalty towards Thrive is a lot of what Adrian does and what he does in those hours of conversation.

[00:02:09] JP: So Adrian. This is it, man. You’re on the podcast.

[00:02:13] Adrian: I can’t believe it. Um, he must need something and that’s why I’m on now. Um, and why he buttered me up. Uh, but thank you, JP. Yeah. Uh, what a ride. Yeah. 16 years. We were just talking about, uh, we were in our, we were 40 years old. When we started this company. Oh, you just gave away our age.

[00:02:34] Adrian: And that’s crazy, crazy, crazy to think. Yeah. People are so focused on, uh, early success. You know, they think right out of college, I need to have a job. I need to know what I’m going to do. We’ve been through so many different avenues of work which built our base [00:03:00] so when we were at the age together we built this but without all of the other things I don’t know that we could have gotten here.

[00:03:09] Adrian: Well, you know, it’s

[00:03:10] JP: interesting that you say that and I want to get to your story. I don’t want to go too far ahead of the story, but when, when success hit us, like the moment the wave actually hit, which took us a while,

[00:03:18] Adrian: about four

[00:03:18] JP: years, we were ready for it because of that maturity, because of everything you’re saying, because of the experience, like a lot of people get the wave, they finally get the opportunity and they, they surf and then they, they nose ball and die.

[00:03:29] JP: We were able to take, actually take an opportunity and run with it and create success. Well,

[00:03:32] Adrian: unfortunately we had a lot of failures. Before that. Yeah. Right. But you learn.

[00:03:37] I

[00:03:37] JP: wouldn’t call them failures. I’m not sure if they’re made. That’s true. Or

[00:03:40] Adrian: challenges, right? We can say challenges. Um, my background is so crazy.

[00:03:46] Adrian: And I often tell my, my daughters that just graduate college, find something you’re passionate about. And I guarantee in five years, that passion’s going to change because [00:04:00] you’re going to find something else that you really like, but you take it with you and you’ve learned a heck of a lot. Counseled adolescents and did family therapy for 10 years before I did anything with.

[00:04:16] Adrian: Financial markets or anything to do with real estate. That’s a long time of just dealing with people, problems, how to negotiate, how to connect with people. And. That base.

[00:04:32] JP: Was it rehabilitation? Was it like drug rehab

[00:04:34] Adrian: you were doing? It was drug rehab. I worked at non profits with gang kids dysfunctional families sexual abuse eating disorders You name it.

[00:04:47] Adrian: I was in the middle of it and that was I was the old days when insurance was really good But I worked at an inpatient Hospital the kids would normally stay 30 to 60 [00:05:00] days Now, they probably, depending on, you know, insurance and what have you, it’s maybe two to four weeks. So it’s very different. Yeah. Uh, but what is, is so unique, humans want to connect and they want more than just the widget or what’s my return.

[00:05:22] Adrian: While that’s very important, we build relationships for the longterm and that makes the good and the bad news. It’s easier to hear because the relationship is there. It’s like a foundation of trust, a foundation of respect. It’s much longer. Yeah. To, to build that and you know, in our early days, first of all, if we got a 10, 000 check, we were high fiving and that was a big deal at that time.

[00:05:54] Adrian: But like I mentioned early, four years it took us. [00:06:00] To where we started seeing the fruits of all the hard work. And the only way I knew how to do that, because I didn’t know the first thing of raising capital was if I build good relationships over time and then present Real estate, they can focus on the real estate because they already trust me, right?

[00:06:24] Adrian: And that’s hard to do because we have deadlines. We have a deal that closes in 90 days. We need the money Yeah, right, but if you push the money verse the relationship or the trust

[00:06:38] JP: I had an investor yesterday I was talking to one of our investors yesterday who said, you know, really on that deal because you know Things are a little tougher right now that you on that deal.

[00:06:46] JP: I’m so comfortable because I trust you Yeah, like that’s, you know, she’s not asking me for market updates and I asked her, like, what happened now? It’s like, I trust you guys got

[00:06:54] Adrian: this and that’s. The patient part is the hardest part [00:07:00] because how many people walk into a car dealership and the guy or the woman walks right over and you cringe.

[00:07:11] Adrian: They don’t even open their mouth and you already know that they’re going to be pushing the car, right? You don’t want to hear that. And the soft approach. It works for some people, it doesn’t work for others, but it works real well with me. So much so that sometimes

[00:07:28] JP: Is that what made you so good for those 10 years you were in rehab?

[00:07:30] JP: You would just listen, connect, slowly build trust. So it’s kind of the same. It sounds like your years doing your work, the rehabilitation work, has a lot of similarities

[00:07:41] Adrian: to raising money. A hundred percent. It’s relationships. Yeah. Right? It’s trust. It’s communication. I think the hardest thing With investor relations is one, we want to do all the talking and that’s not always the way to do it.

[00:07:58] Adrian: You have to listen. Yeah. [00:08:00] What I try to do over and over again, and I do it better with investors than I do sometimes with my own wife, which she lets me know, is that I’m so ready to talk before somebody is finished, you can never understand what it is they want. What I really try hard to do is envision what are their needs.

[00:08:29] Adrian: What do we, what are investors worried about? And if we address those things before they mention them, all of a sudden, when I ask them, do you have any questions? They’re like, well, I had 10, but you answered them all all of a sudden. I’m communicating and connecting with them. Yeah,

[00:08:51] JP: I find that that’s, you know, I would agree with that, Adrian, cause you know, I can talk.

[00:08:55] JP: And, um, I actually, I have become a much better [00:09:00] listener. And I think my skills also, when we’re raising money together, like I’ve really listening. And sometimes there’s guys, sometimes in the room, there needs to be a pregnant pause where you actually, you think you want to talk and give space to the room and you don’t.

[00:09:12] JP: Right. And it’s that moment. You’re giving the person to process what you said and not filter your point. Not fully even rushed because sometimes it’s now they’ve got the information, but it’s all about timing. And that, like I had a young guy who was trying to sell me, uh, he’s a wealth, wealth manager at one of the large ones.

[00:09:26] JP: He was trying to sell me yesterday. He was reading me off a card. He didn’t mean to, it was a zoom call. And he was like, JP, these are the three reasons why you want to go with me. And God bless him. I mean, he’s young, he’s 28, but like, and I kind of let him know, like, like this ain’t going to happen, but. You know, I like your tenacity gotta learn.

[00:09:43] JP: He’s gotta learn. Right?

[00:09:44] Adrian: Yeah. That’s how, part of it. But you, if we can put ourselves in the other person’s shoes and think about what do they need to be safe, right? One of, you and I know because we’ve done this a long time, one of the hardest [00:10:00] things to do is write a check and give it to someone else. Oh yeah.

[00:10:04] Adrian: It’s, it’s super hard, right? And so we need to be aware of that. And I think the other big thing that you and I do instinctively is… Know your audience. Yeah, for sure. Right? Know when it’s a high net worth person that has a lot of money. They haven’t invested in real estate. There’s a lot of fear there and they’re very savvy but They haven’t done real estate, or we talked to a veteran of real estate.

[00:10:39] Adrian: That conversation is very different because we know what specifically they’re going to want. What’s the occupancy, what’s the sub market, what’s our business plan. That’s totally different than taking a bigger picture of someone that doesn’t understand

[00:10:55] JP: the real estate. Right. You know, today I had a call from a prospective investor.

[00:10:59] JP: I’ll tell you more about it, all [00:11:00] the good stuff, but I got no, like I, I, it was a referral source. I got nothing about this person and I kind of assumed based on the referral source that this was going to be an unsophisticated small investor. I didn’t blow it off, but I could have easily been 10 minutes late cause you know, I can be late to everything and, and you know, Cody’s pretty good at keeping me right.

[00:11:16] JP: And I get on the phone. I get on that zoom call and I’m really kind of like not thinking much of it, but I did exactly what you like the, the not talking. The first thing I just said, I let the person just introduce themselves. We got past the night cities. I said, how can I best serve you? So I was, what do you, what, like, instead of me just jumping into like, blah, blah, blah, like, how can I best serve you?

[00:11:34] JP: What, what are you looking for? You know? And turns out she’s. Sophisticated, wealthy, financial planner who could bring me at massive lead sources. And she’s already researched us like crazy. She’s been on our website. She’s been everywhere. She was fully dialed in. So I completely had the wrong assumption going in.

[00:11:49] JP: And if I would have spoken, just gotten in my sales mode, it would have, it would have totally destroyed the energy of letting this person like who’s smart, sophisticated. Wealth [00:12:00] Manager, who’s already researched, by the way, already believes in. She’s like, honestly, I, because of this referral source and because of my research, I’m in on you guys.

[00:12:07] JP: Like, I need to know more about what you do and your offerings, but like that trust has already been established. You naturally

[00:12:12] Adrian: nurtured the successful path as opposed to trying to force it because you were so determined because you like, like the, you already preconceived what, what was going to happen.

[00:12:26] Adrian: Yeah. And. A lot of times it’s the worst thing. It’s the worst thing. It really is. And we still

[00:12:31] JP: do it. It’s all this confirmation bias. Adrian, I want to take one step back. So we met, like, I moved to Austin 19 years ago. We met almost immediately. We became friendly. You know, and, uh, Two weeks into

[00:12:42] Adrian: your move here.

[00:12:42] Adrian: Two weeks

[00:12:43] JP: into the move, you came here. I was just working out, you know, working in my office, Scholl Creek, but not much. And, uh, We really didn’t talk about business too much and you know, it was social, it was really more social two or three years later, we have lunch together, it’s a cycle, very [00:13:00] similar like today’s cycle, cycle pressure, things are going down and you say, let’s have, let’s have lunch, I didn’t know what to expect at the lunch and at the lunch you’re like, you know, where do you think things are going?

[00:13:09] JP: Very much like this moment and you and I had a really funny conversation, but the bottom line of the conversation was, I’m like, I don’t know you too well, I don’t really know what your skillsets are, I know you, I know we’ll talk about you’ve, you’ve, you’ve done this rehab for 10 years, you’ve traded stocks.

[00:13:22] JP: Okay. That seems really, really different to me. And you said to me, well, JP, what you’re doing, this, this raising money and doing debt loans on real estate, that could be interesting. Maybe I can help you raise money. And I’m like, Well, I can’t pay anything because I don’t got money right now. Like, I’m not paying.

[00:13:37] JP: I’m not paying salaries. You’re like, I’ll do it. I’m like, okay. I don’t know. It’s just so funny how we started because, you know, in some ways, you think about it, you joke and call us the odd couple in some ways. We’re like brothers from another mother, right? Born in different regions. And yet you can almost see the, like how perfect it was, but we were not in a social impact.

[00:13:54] JP: We didn’t bond around, let’s dream up of a social company that’s going to have a social impact. Or let’s dream of a company that’s [00:14:00] going to be really huge. It really was kind of one of those moments of just. Two guys, um,

[00:14:05] Adrian: that were aligned in a lot of the thinking when, when everyone was drinking Kool Aid, that the run would never end.

[00:14:13] Adrian: Not very different from this current run. Yeah. Um, we were a little bit of naysayers and we said all things will, will come to an end and then restart. And the transition from. Uh, counseling to the financial markets. Yeah. What was that about for you? One of my dear friends from college started the first day trading firm in Houston.

[00:14:42] Adrian: And, and talk about funny, he and his business partner, um, coal called, they worked at Lehman and they coal called. Uh, a guy by the name of Harry Houghton, who was the grandfather, the man of day trading. And they were trying to pitch [00:15:00] him the Lehman stocks or come and we’ll manage your money. And he basically said, what are you two schmucks doing?

[00:15:09] Adrian: He goes, you want to really learn the markets and how to trade? And he explained to them what he was doing. And they opened up the first day trading firm. In Houston, and he called me and said, Adrian, you got to come check this out. And I had no idea what to expect. And it was day trading on a computer before you could actually do it yourself.

[00:15:35] Adrian: We had inputters that we would say load to buy a thousand shares of Intel, uh, buy it at 42 and a quarter. Right? Fractions. Now it’s decimals. It used to be, now it moves in pennies. Right? So, over time, I fell in love with trading. And it was on every [00:16:00] single hour, minute, every trade, every day, you knew I did pretty good or I bombed.

[00:16:09] Adrian: And that gratification, both good and bad, Was so good for my temperament because I’m a patient person. You

[00:16:20] JP: really are. You, you, I am not patient and you are so patient. It’s hysterical. And

[00:16:24] Adrian: you never knew if I did good or bad because I tried to keep such an even keel, which is a very good trait of a trader, because if you respond just about with it.

[00:16:41] Adrian: And anything in life, business in particular, emotionally, we tend to make bad decisions. One bad decision can turn into four,

[00:16:51] JP: right? You lost money. Oh, now

[00:16:53] Adrian: you’re pissed. You’re going to get more aggressive and I’m going to make it, I’m going to turn it around. And more often than [00:17:00] not, you dig a bigger hole.

[00:17:01] Adrian: So really looking inward on myself to make better decisions. Coupled with the hard work, the education, understanding fundamentals of the market really helped me survive. Like any business, something like over 90 percent of businesses fail the first year. If you make it past that first year, the percentages shoot up of the chances of success.

[00:17:35] Adrian: Well, it was very true for trading most people. And it wasn’t different than real estate because trading had started. The markets were mainly the NASDAQ. We’re doing the Dell, early Dell years, Yahoo, AOL, all these stocks. We would have teachers, engineers, lawyers. [00:18:00] Housewives, everyone would come and try and trade and this was when we had high flyers.

[00:18:07] Adrian: You know, Yahoo would go up 90 points in a day and people would do one good trade and say, you know what? I’m going to quit my job and start trading, right? Just like the house flippers that we’ve seen or the syndicators,

[00:18:21] JP: crypto, you name it,

[00:18:23] Adrian: exactly. And I was able to survive for about 10 years trading and it got to a point where.

[00:18:33] Adrian: After 9 11, we started going to penny moves, the trading styles. And I’ve always looked at everything for the risk that I take, what is the reward, right? Is it

[00:18:48] JP: appropriate? You and I are both really obsessed. I think how many times on this show have I talked about, I look at, I think a lot of people don’t know how to evaluate the risk reward ratios when you and I, I think do that really well.

[00:18:58] JP: If we’re going

[00:18:58] Adrian: to take the risk, we need to [00:19:00] get paid, right? And it was easier to lose money than it was to make it. And after 10 years. I figured, you know what? It’s time to find the next passion.

[00:19:12] JP: Yeah. And let me ask you a question about that too, because I know where this is going. I know, since I’ve now known you for a long time, that part of what makes you successful, I believe, is not just your patience.

[00:19:23] JP: You love people. You have a natural love for people. So I could see in those 10 years of rehab, like doing, I see how you are with our investors, like to a fault sometimes you love people. How did you get your scratch when you were trading? I mean, yeah, so yeah, I’m sure you had brokers and you got office buddies, but it really wasn’t that love for people that you have

[00:19:41] Adrian: like now.

[00:19:42] Adrian: It’s funny you say that because I actually started. Uh, for the office where I did trade, um, I started a program for new traders. Yeah, of course you

[00:19:53] JP: did. Now this makes more sense.

[00:19:56] Adrian: I wanted, I, I, the way I, I [00:20:00] presented it to the owners is, They made money on times everyone pushed a button to buy or sell. So it was to their benefit to have people stay longer and make more trades.

[00:20:13] Adrian: So my goal was to slow the process down for new people coming into trade. To not lose all their money in a month, to allow them to learn over time, to respect the market because no matter how smart we are, the markets are much bigger and stronger than we are. Which is still

[00:20:39] JP: today in commercial real estate, it’s the same thing that we’re experiencing today.

[00:20:42] JP: Which is part of our

[00:20:43] Adrian: secret sauce, um, in realizing that. If a market wants to go in a certain direction, it doesn’t matter what we think, it’s the timing of it. We could be [00:21:00] right. We’re just

[00:21:00] JP: too early. Right. Well, you and I have experienced this so many times. I mean, definitely. So, Adrian, and this leads me, I’m going to go through the story because I have a bunch of questions I still want to ask you, but so this leads me to, if we can, let’s fast forward.

[00:21:12] JP: We’re together now. We have this little office condo where you’re sharing an office. You’re in there. And I’d say the first year, you know, when my wife would check in or our mutual friend would check in and say, how’s Adrian doing? I’m like, I’m not sure, I’m not really sure. Like I, he seems busy, but I don’t know, we haven’t got any new investors.

[00:21:30] JP: It’s been three months, then it was four months, six months. I’m like, like. God, like, it’s not, I think he’s a really energized guy, he’s driving, I think he’s driving like an hour a day each way in traffic. His wife has cornered me and says, if this doesn’t work, she’s going to kick my ass. Like there’s a lot of pressure on me, but I’m not feeling really good about this because I don’t see anything closing.

[00:21:50] JP: And this was like the first year together, it was a funky market, you weren’t closing and yet you kept coming. Like, tell me about like, well, cause here you are, you had the skills, you had learned all these great skills, you had [00:22:00] traded. You really got to connect with people yet you kept trying and like what was going on and what what shifted for you because that was an interesting first year we had together.

[00:22:08] Adrian: That was hard. It was a hard year. Um, I’m a really determined, stubborn person. Yes. In a very passive way. Um, I don’t get all worked up about it but I love trying to find my way of doing something. There’s no standard. On how to raise money. No, there’s no book. Oh, this is how you do it. Right? The person I shared the office with, um, felt I would never succeed because I wasn’t a hard closer.

[00:22:49] JP: I remember that. That’s right. He was giving you all the hard close. You

[00:22:53] Adrian: got to close them. You got to close them. And I said, I do, I will close them. It’ll [00:23:00] take longer, but I’ll do it in a more effective way. And that was through relationships. Now, is it good or bad that we started to try to raise capital? I started a new business.

[00:23:15] Adrian: for all intensive purposes in 2008. The greatest recession that we have ever experienced.

[00:23:23] JP: But. That’s where you make your money. When you can raise money in tough markets, that’s the secret to success. Well, and you

[00:23:29] Adrian: really learn if you, if we would have started raising money. Uh, in 2015, 16, which we call the go go days, um, you think it’s you,

[00:23:42] JP: right, but it’s market momentum.

[00:23:44] JP: Everyone wants to taste a bit of the honey. That’s right. So Adrian, we’re now we’re getting on nine months, 10 months, 11 months. And you’d say to JP, I know this one’s going to close and then it wouldn’t close. And I’m like, so I’ll tell you. So what was it like? How did you go? Because I really want the audience to understand [00:24:00] Adrian, like.

[00:24:00] JP: For all of us, closing is an art. It’s, it’s a, it’s, it’s an art form. It’s a skill. It’s, it’s a tempo. And I know it was a really, you are a master closer now,

naturally, not even trying to be, but I remember that first year. What, what transformed, what

[00:24:15] Adrian: happened? It was a couple of things. One was. You went away, you went to California for a weekend, for a long week, and I wanted to learn, and I wanted to understand everything about private lending and hard money.

[00:24:35] Adrian: I walked up to our filing cabinet, I opened it, and I pulled out every file in our filing cabinet, and I sat down on the floor with my computer, and I looked through Every single, not only the first trust deeds, but the lawyer docs, title, everything, and every word that I didn’t know what it was, I’d Google it.[00:25:00][00:25:00] Adrian: And I’ll never forget this. You came back and we sat in a meeting together with an investor and they started asking questions and I started rattling all this stuff off and the look you gave me was like, who is this guy? Where did this come from? So knowing. Your product or your expertise, whatever you’re presenting, knowing the information is one of the greatest things that you could ever do for multiple reasons.

[00:25:40] Adrian: One, the other person now steps back and says, wow, they are an expert. They do know their stuff. The second is, which is so unique. It gives you an inner confidence without arrogance. [00:26:00] Completely. I don’t want to be a know it all. What I want is to have most of the The answer is to the questions that are going to come up.

[00:26:08] Adrian: Right.

[00:26:09] JP: You and I have both seen also, I’ve seen times when people present like investors, when they don’t know the answer, they kind of BS the answer or they kind of give you, and you and I can smell it. So like, I’d rather have someone, and you and I used to say this in the early days, if you don’t know the answer, just say, you know what?

[00:26:22] JP: Good question. Let me find out. Let me get back to it. Let me get you the answer. But be humble. But that establishes the confidence. That’s not that you have to know everything. But I know, I know for you, once you have that knowledge, and because I think a lot of people think they have the knowledge, they get excited, and there’s 70 percent there, but they’re not really, they’re not, they don’t have any mastery, like the kid yesterday, sorry kid from yesterday, I’m calling him, but not by name.

[00:26:46] JP: So, so really the difference between mastery or thinking. And then in that having the confidence and what does the confidence do? Because like, what was it? Because you started closing and all of a sudden things would start closing. Like what was the difference where all of a [00:27:00] sudden you would, it’s still you, you’re the same personality, same great person.

[00:27:04] JP: So why were they closing? Was it an energy? Was it a cadence? What was it?

[00:27:08] Adrian: It was a little bit of all those things. When? We present well, and people hear that we are really good at what we do, I don’t need to convince them of anything. I can allow them to make the decision, but it kind of, it’s like a reverse psychology.

[00:27:31] Adrian: We had what they wanted. We had great returns. Everybody’s portfolio was imploding. The stock market was plummeting, their investments were plummeting, and here we are giving people 10 percent returns, right? We had what they wanted. Which we do now,

[00:27:51] JP: by the way, too. That’s right. Our secret was about to come up soon.

[00:27:54] JP: That’s right. We can’t talk about it yet.

[00:27:55] Adrian: But instead of [00:28:00] over pursuing and allowing all the power to be in the investor’s court, I took that power and I said, This is for your benefit. If you want it great, and if you don’t, that’s fine. You still do that by the way. Instead of Trying to convince them, this is what they want.

[00:28:26] Adrian: It’s that used car, right? Oh, let me go talk to my manager. I’m going to get the price knocked off. Right. Just to close that deal. Right.

[00:28:36] JP: You don’t have to do that. I totally get it. It’s like the idea of being, are you transactional or non transactional? In other words, you have a preference. Yeah. Well, you and I both want to double the size of this company, but, but you’re also willing to give someone the space and that’s a confidence and that you can’t fake either.

[00:28:52] JP: Either if you’re attached, people just like, just like dating, if you’re attached, people can feel it. And when you’re not attached and you’re really there to serve them best, I think

[00:28:59] Adrian: the [00:29:00] hardest thing is when you’re trying to get a task done and that’s raised capital, you press. And when you press, people sense it.

[00:29:12] Adrian: When you don’t press. That’s when they can be allowed to make the decision. And if you provide them with all the information correctly, it makes the decision easier. And that’s really, it was a very hard lesson to learn. It was painful. Um, but when I realized that I’m not at their beck and call 24, 7, and we do this a lot, the investor wants to talk at 7 PM.

[00:29:41] Adrian: I don’t work at seven. Well, I’m working all day. Well, what are we doing? We’re working, right? And when you give the parameters. They will now sacrifice something and make the time because they do want what we have

[00:29:57] JP: to provide. And you’re actually valuing your time. I mean, [00:30:00] that makes a hundred percent. That makes a lot of sense.

[00:30:03] JP: So Adrian, let’s, let’s fast forward a little bit. It’s, you know, first of all, I actually learned something just now, which is because if somebody would have said nine months or 10 months or 11 months, you know, why is that, why is that guy coming back? Why is he rolling up in his Toyota? Why is he rolling up in his Toyota every day, sitting in traffic?

[00:30:19] JP: His wife hates me. Like, what’s going on here? And I think the answer from what I’m hearing you say, tell me if this is right, is you believe, we had a product, you believed in the product at the end of the day. You might have believed in me too. And I believed

[00:30:32] Adrian: in us. I believed. We’re good people, we’re, we have the right intentions, and we’re not…

[00:30:40] Adrian: We always talk

[00:30:40] JP: about right intention, that’s important too. Yeah, we weren’t

[00:30:43] Adrian: trying to be something that we aren’t, and we weren’t trying to get rich quick. Um, We weren’t even thinking about the money. I used to laugh at you because you were the quintessential, um, [00:31:00] California producer. Think big. I wasn’t thinking big.

[00:31:03] Adrian: I was thinking, man, I want to pay bills. Right? I would love, do you remember what one of my goals was when you asked

[00:31:12] JP: me? Your wife wouldn’t have to work. That was such a, it was such an important goal for you. I’m going to make enough money, not only pay my bills, but my wife won’t have to work. And it was really important.

[00:31:20] JP: If she doesn’t

[00:31:20] Adrian: want to. If she doesn’t want to. That’s it. And so it wasn’t about get rich quick. It was about doing things the right way and knowing that the more we did that, the money would come. I had no idea that it would be where we got, um, but what’s amazing is I remember very clearly, people would tell us, oh, that first million is the hardest to raise.

[00:31:51] Adrian: And then, All of a sudden, the 2 million is easier and the 4 million, and I used to say, well, we’re, we’re going to [00:32:00] raise a hundred million. And I was like, yeah, right, dude, we’re not going to do that. And when I was asked to be on a panel for multifamily, um, our asset manager said, Adrian, let me put together our tape.

[00:32:17] Adrian: So, you know,

[00:32:18] JP: what are we done? Yeah.

[00:32:20] Adrian: And I looked at, we had raised over 300 million in equity and bought close to a billion dollars of real estate. And I called him and I said, is this right? I can’t believe we’ve done that. And I had no idea. I knew we were doing well, but putting the numbers down, I was blown away.

[00:32:46] Adrian: And to be honest, we don’t do anything different today than we did before. We are a little more sophisticated, a lot more sophisticated. We’re, we’re more efficient, we’re [00:33:00] much smarter because we’ve had bad deals along with good deals. Right. But our premise is still very similar. Our styles are still very similar.

[00:33:10] Adrian: They are. We don’t pound our chest. You know, it’s,

[00:33:12] JP: it’s funny, Adrian, you say that. ’cause even now. I mean, you and I, there’s a whole thing about relationships, about partnerships, it’s really, you know, I joke and sometimes we say we’re the other, like the other wife or the other couple, um, so today, like, I’ve been asked a lot, so why, why would

you want to continue doing, like, you guys have had the best run, why would you want to do it again, and I said it’s fun, it’s fun because I think you and I, through all this success, are fundamentally the same people.

[00:33:37] JP: Um, we show, I always notice that we show up sometimes we’re the last ones to leave. Our employees have left and we’re still there. And I think there’s, there’s, the fun, the fun for this and the joy in the original intention. It’s still baked into this. And I think if we had gotten too big, which is why in some ways, like we’ve gotten really big, but we’re not institutionally big.

[00:33:55] JP: And I think that’s what keeps the joy in it for us is like, we’re actually still doing a lot of the same things, [00:34:00] the same people, same intention. Would you agree

[00:34:02] Adrian: with that? I 100 percent stay grounded, stay in your lane. We know very much what we don’t want. Yeah. It’s true. We have, we’ve

[00:34:12] JP: known for a long time.

[00:34:13] Adrian: We’re not about how big we can get with institutional capital. Some people that’s their MO and they do it very well. And that’s great. That’s just not us. And I think the hard thing is as you get bigger and we’ve seen it in our industry, You start to believe it’s you. We know very well. It’s not us. We’re a big part of it, but the market is much bigger than we are.

[00:34:43] Adrian: And I tell investors all the time, you can buy a great property at the wrong time. And you look like an idiot and you can buy a horrible property, which we’ve bought many at the right time. And you look like a genius. What we don’t do is [00:35:00] say that’s because of us. We’ll tell them, yeah, we’ve done the work.

[00:35:05] Adrian: We know how to build communities. We provide for our tenants really well, but the wind was behind our sails. And when you give credit to the whole picture as opposed to it’s just us, it’s different. It’s

[00:35:23] JP: different. Let’s talk about this. There’s a, there’s an aspect. I actually had someone come up to me this week.

[00:35:28] JP: Who they, they raise money for a living and they have a big loss coming up. They’ve got, they’re gonna lose by 80 percent of the capital or if not more. And unfortunately the guy, the, the person in the company who’d raised

the money, they really worked hard. Um, and the markets in the market, their market, the market, the market address you.

[00:35:46] JP: So, for you Adrian, you love people, you care, and sometimes there’s big wins and sometimes there’s, there’s losses. And how do you navigate, I mean, I know you can, I know you communicate, but how do you keep [00:36:00] yourself sane? Like, cause I know sometimes, and sometimes we don’t, sometimes we probably care too much and sometimes you come in and you have a look on your face and I know what that look is and vice versa.

[00:36:08] JP: Sometimes I have those days. It’s excruciating, yeah. Because we care so much. So I know a lot of people who don’t. What I said to my advice to him today is I said, did you give it when you call your investors? Cause he hasn’t honestly given the investors the bad news about how much they’re going to lose yet, which you always do early.

[00:36:24] JP: We always say tell people good news or bad news often and early communicate as much as you can. And he hasn’t done, he’s been, he’s been waiting for a better result, but the results not coming. And so, but I said to him, so have you at least. Do you feel like you’ve done your all? Like, it sounds like there’s a market thing.

[00:36:41] JP: There was some dishonesty that you had no control over. Like, like, do you feel like you’ve given it 110%? He said to me, I’ve given it 120%. And I said, if you’ve at least given it 120 percent of what you can to protect and be a good fiduciary. That’s a much better conversation than people who haven’t, so can you give me, can you [00:37:00] give me some, like, your own

[00:37:01] Adrian: experience on that?

[00:37:02] Adrian: I carry a lot of the unwarranted pain, um, but some people are better at carrying it and letting it go at some point. That is not the outcome we wanted. If we were negligent and it was our fault, that’s

[00:37:24] JP: harder to deal with. That’s much harder to

[00:37:26] Adrian: deal with. Yeah, for sure. And human nature is, is crazy because.

[00:37:33] Adrian: You can have an investor you’ve done eight deals with, seven have knocked it out of the park, one lost money. And what’s the one that they always throw in your face? It’s true. And so you, we can’t battle that, but

what we can do is say, let’s take the whole picture. You do this a lot. And when you [00:38:00] do, it changes the frame of mind.

[00:38:01] Adrian: Because just like something as simple as a Google review or a Yelp review, they’re a lot more negative than positive. Why? Because it’s easier to bitch about something, right? People, if they’re happy, sometimes they’ll do it later. I won’t even put it on there, but boy, if they’re pissed off, they’re on that typing out all the bad things, right?

[00:38:26] Adrian: So you just have to step back a little and look at the big picture. And I think A lot of times, when things don’t work well, and we didn’t do everything we could have,

[00:38:43] JP: That’s the hard times. That’s the hard times. And sometimes even with us, even if it’s not us, it’s our partners or one staff member just screwed up.

[00:38:50] JP: It’s on us. We take it for the team. We’re the leaders. So it’s not like you can’t pass the buck, unfortunately. You can’t. The buck stops with us.

[00:38:58] Adrian: And it’s, it doesn’t, [00:39:00] I don’t know that it gets easier. I’m going to put that out there. It is hard, but this is the business we’re in. And the reason we can offer 20, 30 plus percent returns is because there’s risk.

[00:39:17] Adrian: And so sometimes they don’t work and it could be a lot of factors. That, you know, right now with interest rates going up at the clip they are, it’s choking a lot of our properties. We can’t, there’s nothing we can do. That’s the

[00:39:32] JP: macro. So I’d say one of the things for me, Adrian, is as we’ve matured in the business, those I can separate better the difference of what I can control, what I can’t control.

[00:39:40] JP: And

[00:39:41] Adrian: it’s not. Block it out or don’t be human about it. It’s managing the highs better and the lows better. And that is one of the things, the greatest traders that I ever traded with managed the highs [00:40:00] really well, as good as the lows. Because if you think your doesn’t smell, guess what it sure does. Right.

[00:40:10] Adrian: And so. Don’t pat yourself on the back. Too much, just as don’t allow the, the bad ones to take you in the doldrums and it’s, it’s

personality. Some people have an easier time than others. Um, but you do manage it better.

[00:40:31] JP: I want to run around. We never thought that we’d be that big, that we could be talking about social impact and the, uh, Health of our residents and workforce housing and how we can make a dent in it.

[00:40:40] JP: And I remember, so I remember I went to a local TED conference and I came home and I said, Adrian, I want, our company at the time was called Principals Capital Funding. I said, Adrian, I have a different idea. Like, cause I was getting tired of seeing the same tenants in the same, you know, extractive practice.

[00:40:56] JP: I’m like, what if we change our name to Thrive? And we become about for purpose. [00:41:00] And, and you remember your first reaction?

[00:41:03] Adrian: You’re like, what the fff?

[00:41:05] JP: What are you talking about, Jimmy? It was a little scary. There was a little risk there. People ask me a lot, like, was there a risk in changing your company? You were concerned, like, might we lose investors?

[00:41:15] JP: And even now, I read an article today in a major publication that ESG is becoming political. Certain parties are for ESG. Some think it’s too soft. When you talk about a, a, a commercial real estate finance company that does syndication and private equity, talking about way before there was ESG and we’re talking about social impact and throwing it right in the name.

[00:41:37] JP: So we’re throwing it right in people’s face. That wasn’t there, there was a risk to doing that.

[00:41:42] Adrian: There was. And, and I think the unique thing was. At that time, we were walking a lot of properties. Remember, there wasn’t a property on the market that we didn’t go walk in. And that was Houston, Dallas, San Antonio, Austin.

[00:41:59] Adrian: [00:42:00] We were everywhere. And there was a common theme. And you remember that property we bought behind Reagan High School? Of course. And we were like, we’re not buying this. And when I was walking it, I started to see on all the balconies, the potted plants everywhere. It was their garden, right? And the connection that that was where they lived and they were proud of where they lived.

[00:42:27] Adrian: When you said the Mackie way, it resonated so much to me. And it wasn’t that we wanted the frou frou and to do this non profit. It was. Wow. If we can get people happier at our properties, they stay longer, we benefit, we turn less units, we make more cashflow, that’s, that’s a win

[00:42:57] JP: win. Yeah. And you [00:43:00] actually, I remember the plants, I actually remember the apartment when you said these plants, and then I’d say, yeah, they painted their wall, little cues that they actually like living here, that they’re going to, they’re going to live here longer.

[00:43:08] JP: And

[00:43:08] Adrian: it’s, it’s different because if you have a shiny A class property. You don’t see as much of that, right? But they might want higher amenities or little things. At the end of the day, humans want connection. They want community, so it doesn’t matter if it’s an A class property or a C class property. If you give people the, the runway to create a community, they’re happy.

[00:43:40] Adrian: And happy tenants do what? They pay rent! And that’s what we want. And so, I think the neatest thing is, we could have stood real pat. On the little things and because you are the visionary producer, [00:44:00] you thought much bigger, and I still think one of the greatest things that we ever did as a company was during COVID.

[00:44:11] Adrian: Hammering, Teladoc, to subsidize it for our tenants. Yeah.

[00:44:17] JP: And provide it. They weren’t even open to providing it for apartments. It’s amazing. Yeah.

[00:44:21] Adrian: Right? Not a lot of people would ever think of doing something like that and kudos because you did and you were determined to do that. Thank you. Yeah. What gets us.

[00:44:34] Adrian: What I’m most excited about potentially this next cycle is how many more tenants lives can we embed with better living conditions? That is exciting, right? The beauty is we know if we can get as big as we want, we’re all going to benefit. Financially, that’s great, but think about how many [00:45:00] more lives we can touch if it’s 5, 000 more tenants, 10, 000 more tenants that are happy living where they are because we provide them

[00:45:11] JP: with all these things.

[00:45:12] JP: I also think it’s kind of our employees and our team too, the more success, can we give more to it? Can we do more through profit sharing? Can we do more for the team? Like all the stakeholders definitely winning, you know, and I think, you know, I’m going to wrap this up, Adrian. So I try to keep them not too long, but like.

[00:45:24] JP: You know, on the last point too, you think about it, we are the last people, we weren’t corporate guys, I was not, no MBA here, uh, at least you have, you have your advanced degree, I don’t, um, and maybe it was the fact that you came from this path of social work, and maybe it’s the fact that I was, you know, producing films when I was vice president, like, like, We’re the two people that probably should have been outside the box.

[00:45:46] JP: And I think that’s what’s been kind of our secret sauce for Thrive has been we have two guys as different as we can be. I think we share a very similar heart, a heart for people. And I think, you know, the money is so great and we have good minds, but when you kind of [00:46:00] balance your mind and your heart, so we’ve had the discipline to hopefully make great and attract recruits as we do great risk adjusted returns, but have the heart to make sure that it’s about people at the end of the day, because what would this be agent?

[00:46:11] JP: If it was you and I, if you were out. I mean, golfing any more than you were golfing. No, I’m saying if you, how many people do you know at this point, they hit a certain level of success and they kind of mentally check out. They do. And you and I, for better or worse, we’re, we’re still the scrappy. I still feel like we are the scrappy entrepreneurs that are going to sit there for better or worse.

[00:46:30] JP: And as long as we’re doing this, because we have other investors and really just our personality, we’re just going to keep hammering, scraping down and watching our stuff. Good or bad. Like right now you are putting a. Boatload of time into a challenging project and you’re just determined to get that that project and it’s gonna happen because You are the owner not some staff members coming out and like every day Painfully driving to make that thing turn

[00:46:53] Adrian: around.

[00:46:53] Adrian: Yeah, and Again, it goes back to the early days of trying to raise capital. It’s [00:47:00] it’s the human factor. We We want relationships. We want to connect with people it takes longer, but if you do that in business

Good things happen, right? And it’s all down, up and down the totem pole. It’s not just rubbing noses with CEOs or ultra wealthy.

[00:47:21] Adrian: What, what about our tenants, right? Giving them after school programs, right? Um, it’s those little things. It’s the humanness. And I think when you’re a big CEO and you’re building widgets, how much connection can you really have? Right. Efficiency. Right. Oh, we can cut costs here. We can lay off people here.

[00:47:44] Adrian: We have a cork board and we can just put that one down and we put up a new cork board and we can design. There’s, there’s nothing standard with any day that we walk in together. And I [00:48:00] think that’s exciting.

[00:48:00] JP: You never know. Um, I think when we do our next episode or whatever that is, I think it’d be really fun to talk about partnership because I think that people talk about like, I am so grateful to you as a partner, but as you know, for both of us, it hasn’t always been that way.

[00:48:13] JP: And there’s certainly been ups and downs. And I think that to get to a point, just like a marriage where you really get to the point, you know, you wire money. I haven’t wired money. You wire lots of money and I haven’t wired, I haven’t touched the banking account in, I don’t know how many years, 10 years.

[00:48:28] JP: And. There is, there is a cadence between partners and I think we’ll save that for the next episode, but I just want to acknowledge you that, and thank you for being such an incredible human being partner. It’s work. Yeah.

[00:48:39] Adrian: And I think. With anything in life, we think it’s just going to happen, and once it happens, then you don’t have to keep working on it.

[00:48:47] Adrian: Well, friendships, marriages, partnerships, that’s part of it. It’s hard work, and sometimes it’s not a lot of fun, and it sucks. And we say a lot of [00:49:00] things to each other that are cold, hard truths that we don’t want to hear, and it’s what we do from that point on. And as long as… It’s we’re willing to continue to work on it.

[00:49:13] Adrian: Things get better. It’s when one checks out and nothing will ever change and it’s stale. Um,

[00:49:20] JP: I learned that with you is the very similar to my, this is, I’m going to close with this. What I’ve learned about you as my partner and my wife as my partner, I can be right or I can be happy

[00:49:29] Adrian: it’s pretty good sometimes

[00:49:36] JP: and.

[00:49:37] JP: Sometimes I’m so sure that I’m right on both cases with you or with her and I maybe I don’t know if it’s mellowing or maturing or wisdom of really being able to see someone else’s point of view which we both have had a like I just don’t get you

[00:49:50] Adrian: this hurts

[00:49:52] JP: Okay, we’ll save it for the next one Adrian.

[00:49:54] JP: Thank you. Love you, brother. Love you. Love you. Great show. Thank you so much Thank you